Updated from 2:48 p.m. EDT

Oil futures closed down Thursday, briefly going below $60 a barrel for the first time since July, after data on natural gas inventories showed a much larger build than traders had been expecting.

November crude closed down $1.38 to $61.03 a barrel. Unleaded gasoline was down about 6.2 cents to $1.61 a gallon. Heating oil was off 4.5 cents to $1.87 a gallon.

The plunge took a big toll in shares of energy companies, with the Philadelphia Stock Exchange Oil Services index falling 3.4% and the Amex Oil Index losing 4.8%.

Natural gas dropped more than 4%, losing 57 cents to $12.98 per million British thermal units.

The Energy Department said natural gas in underground storage rose by 75 billion cubic feet for the week ended Oct. 14, about 20 billion more than had been anticipated. That takes the total natural gas stocks for the continental U.S. to 3,062 billion cubic feet.

Stores were 152 billion cubic feet below last year at this time and 53 billion above the five-year average. Before the data were released, the market was already contending with a big addition to U.S. crude stockpiles, which was reported Wednesday, and the diminishing threat of Hurricane Wilma to energy infrastructure.

The Energy Information Agency said crude inventories rose last week by 5.55 million barrels, about twice the expected gain. Gasoline inventories defied predictions for a decline and rose by 2.9 million barrels. Distillate stocks fell by 1.9 million barrels, in line with estimates.

Gasoline production rose to more than 8.5 million barrels a day, while distillate production rose to an average of 3.4 million barrels a day, according to the report.

"Yesterday's reports showed further contraction in demand," said Mike Fitzpatrick, energy analyst with Fimat USA, referring to the government's weekly petroleum update. "We're taking that to mean that we're going to still see more consumer resistance to higher energy prices."

In highlighting the potential impact of higher heating-oil bills on the economy, Fitzpatrick noted that several companies have already announced plans to start holiday ad campaigns early this year. Still, he added, China's third quarter GDP, where the country's economy by 9.4%, is a sign that the global competition for energy remains fierce.

"Prices are falling and may in fact even reach May lows before winter," he said, "but don't look for them to go back to historical levels any time soon."

Fitzpatrick also noted that while the natural gas supply was greater than expected, "it is still below where it should be this year."

The National Hurricane Center said Wilma, which became the most intense hurricane ever recorded in the Atlantic basin, diminished slightly and is now a Category 4 storm. The storm is expected to hit Florida Sunday night, but energy analysts believe Wilma will not threaten the already storm-battered refineries on the Gulf Coast.

At last report, the center of Hurricane Wilma was about 170 miles southeast of Cozumel, Mexico and moving west-northwest. Maximum sustained winds are near 145 mph and weather analysts expect the storm to gather some strength over the next 24 hours.

Meanwhile, oil refineries in the gulf continue to come back on line following the twin blasts of Hurricanes Katrina and Rita. The U.S. Minerals Management Service said Thursday's shut-in oil production is 967,734 barrels of oil per day, the equivalent to 64.52% of the gulf's daily oil production. Thursday's shut-in gas production was 5.196 billion cubic feet per day, the equivalent to equivalent to 51.96% of the gulf's daily gas production.

On the international front, the Associated Press is reporting that insurgents in northern Iraq set fire to the main oil pipeline that links an oil field in Kirkuk to the country's largest oil refinery in Beiji, 155 miles north of Baghdad. The explosion set fire to the pipeline and several oil valves about 35 miles west of Kirkuk.

In company news, independent oil and gas company XTO Energy ( XTO) said its third quarter profit more than doubled and beat analysts' expectations. XTO said earnings rose to $312.8 million, or 85 cents per share, from $140.8 million, or 40 cents per share, in the same period last year. Revenue increased 90% to $964.2 million from $507.4 million.

XTO said it set quarterly records for its oil and natural gas production and said in a statement that "with U.S. natural gas supply under stress, XTO has increased activity levels to 64 drilling rigs at work, up 10 from pre- hurricane levels and an increase of 90% from a year ago."

Oil and gas drilling contractor Noble ( NE) said its third-quarter profit more than doubled. The Houston-based company said net income rose to $76.5 million, or 55 cents per share, up from $30.6 million, 0r 23 cents per share in the year ago period. Revenue grew 38% to $367.2 million from $265.6 million in the same period last year. Analysts had been expecting the company to earn of 61 cents per share on revenue of $374 million.

Rowan Cos. ( RDC) said it would sell its only semi-submersible rig, the Rowan-Midland, to ATP Oil & Gas for about $60 million. Rowan said it expects to record a pre-tax gain on the transaction of $45-50 million over the 15-month payment period. Rowan will retain ownership of the drilling equipment on the rig and will continue to provide operating personnel to ATP under a separate services agreement.

Citigroup upgraded Diamond Offshore Drilling

( DO) from hold to buy. Lehman Brothers upgraded Murphy Oil ( MUR) from underweight to equal-weight. And Calyon Securities initiated coverage of Halliburton ( HAL) as a buy.

Most of the big energy players were down in recent trading. ConocoPhillips ( COP) was down $3.07 to $58.48. Chevron ( CVX) was down $2.26 to $56.08. Exxon Mobil ( XOM) was down $1.60 to $55.57. And BP ( BP) was down $1.40 to $64.43.

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